You’ve been approached by someone interested in buying your business. This is an exciting opportunity that shows how much value your company has gained. At the same time, while you have a lot of experience and skill in running a business, selling a business is a very different process that requires its own special types of skills and experience. Getting it wrong could be one of the most expensive mistakes of your entire career.
As you consider the prospect of a sale, here are two important questions to think about:
1. Are you really interested in selling?
People complete sales transactions for 4 main reasons:
- Retirement/completing a plan.
- Fundamental shift in their life priorities.
- The business isn’t fun anymore or it’s outgrown the owner’s skill set.
- They’ve received an exceptional cash offer or exit opportunity.
If you’ve decided that you are ready to sell for one of these reasons, then consider the next question.
2. Do you have a real potential buyer?
Some corporate finance businesses will reach out to owners about interested buyers in the hopes that you will appoint them to broker a deal on your behalf.
Never appoint someone who approaches you with a client to represent you. Instead build a relationship with a reputable and experienced advisory firm.
You may also be directly approached by an acquisitive company through 1) an untargeted sector sweep, and 2) a more considered approach based on research into specific targets.
With an acquisitive company, consider if it has made previous acquisitions, what companies it has bought and how comparable they are to yours, what deal structures in terms of upfront money and earn-outs might they employ, where their funding comes from, and what level of individual is aware of and has signed off on the approach to you.
You can make inquiries yourself or engage a professional advisor.
Wondering if you’re ready to sell and to which buyer? Contact the MAXIMA Group for a consultation. We focus on privately held companies with annual revenues of $3 million to $60 million. We also advise larger public and private companies on buy-side engagements.
